Hospital financial performance stable as volumes rise

Hospital financial performance remains stable as greater service volumes offset persistently high expenses, Kaufman Hall reports.

Kaufman Hall released its "National Hospital Flash Report," detailing hospital financial performance on key metrics such as volume, revenue and expenses in January 2025. The report showed ongoing stabilization after a slow recovery from financial performance lows during the COVID-19 pandemic and in its immediate aftermath.

"January was a relatively stable month for hospitals, as more people received care due in part to seasonal challenges like flu and other respiratory diseases," said Erik Swanson, managing director and group leader of data and analytics at Kaufman Hall, in an emailed statement. "Hospitals are also experiencing more rapid revenue growth from inpatient than outpatient services. Expenses are also rising, driven primarily by drug costs, though the rate of cost growth has slowed."

Volumes were up almost across the board, with a 5% increase in discharges per calendar day year-over-year in January 2025. Additionally, adjusted discharges per calendar day were up by 7% year-over-year, while emergency department visits per calendar day were up 4%.

Equivalent patient days per calendar day and adjusted patient days per calendar day also saw slight year-over-year increases, while hospitals saw decreases in observation patient days as a percentage of patient days, average length of stay and operating room minutes per calendar day.

Meanwhile, hospital expenses were generally higher for labor (4% year-over-year) and non-labor (6% year-over-year) costs. Supply costs also increased by 7% year-over-year, with drug expenses per calendar day also rising by 6%.

Additionally, hospitals saw significant year-over-year increases in revenue across net operating revenue per calendar day (6%), gross operating revenue per calendar day (8%), inpatient revenue per calendar day (7%) and outpatient revenue per calendar day (9%).

Bad debt and charity as a percentage of gross revenue was also down by 6% year-over-year.

Overall, hospitals saw a slight increase in Kaufman Hall's calendar-year-to-date operating margin index. The index was 5.1% in January 2025 without allocations, up from 5.0% in December 2024.

With allocations, the operating margin index was 4.4% in January 2025. The allocations account for the cost of shared services that hospitals receive from their health system, such as corporate office expenses. This is a new addition to Kaufman Hall's National Hospital Flash Reports.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.